DiamondPeak Holdings Stock Will Be the Next Winner in Electric Vehicles
Electrical car shares have been huge winners in 2020. The most recent arrival to the social gathering is DiamondPeak Holdings (NASDAQ:DPHC) inventory, which has roared greater over the previous few weeks.
Optimism round this sector makes apparent sense. Merely put, EVs are the longer term. They’re extra dependable, higher for the atmosphere and cheaper to personal over the lengthy haul.
However what’s been notable about 2020, the previous couple months specifically, is altering sentiment inside the sector. It’s not simply the well-established passenger car names which can be gaining. Traders are taking a tough take a look at the business facet of the business as properly.
DPHC inventory has been a transparent beneficiary of that development. This SPAC (particular goal acquisition firm) introduced initially of final month that it was merging with Lordstown Motors. DPHC has practically tripled since.
Right here too, the optimism makes apparent sense. Lordstown is a frontrunner in a key area of interest of the EV area. Its progress potential is critical. And even after the large positive factors, valuation is affordable. DPHC inventory quickly might be RIDE inventory, however regardless of the ticker, I consider there’s considerably extra upside on the way in which.
Once more, we’re seeing extra area of interest gamers and even EV suppliers present huge positive factors on this market. The mannequin for Lordstown and DPHC inventory can go toe-to-toe with any of these friends.
Lordstown is specializing in the electrical pickup truck market. And whereas there are different producers in that class, Lordstown plans to deal with light-duty fashions — and fleet gross sales.
That focus appears good, significantly within the early going. Business prospects possible might be extra amenable to being bought on complete price of possession, the place an EV truck ought to do significantly properly. In any case, each gas prices and upkeep expense ought to be decrease.
It additionally implies that Lordstown doesn’t need to spend important capital on constructing out a nationwide community of sellers — or pay commissions to entrenched incumbents. Pickup vans have the very best revenue margins within the auto business, and the fleet focus implies that Lordstown ought to preserve extra of these margins for itself.
And it’s not as if that area of interest is simply too small for DPHC inventory to be a winner from right here. The corporate’s latest investor presentation estimates a $65 billion addressable market only for fleet gross sales of full-sized pickup vans. From there, Lordstown can supply extra fashions or transfer into SUVs (sport utility autos).
As soon as the merger closes, RIDE inventory may have 164 million shares excellent. The present value of $28 suggests a market capitalization round $4.6 billion. Backing out money on the steadiness sheet, the enterprise itself is valued at nearer to $Four billion.
That’s hardly an onerous valuation. Lordstown estimates that its manufacturing plant has a substitute worth within the vary of $three billion. Different EV performs out there have valuations which can be multiples of the present $4.6 billion market cap.